Section 163(j) and the CARES Act: Special Partnership Rules, International Tax and U.S. State Tax Implications

A live 90-minute premium CLE/CPE webinar with interactive Q&A


Thursday, June 25, 2020

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE/CPE webinar will provide tax professionals a critical analysis of the recent changes made to Section 163(j) under the CARES Act. The panel will discuss new special partnership rules and the impact of the revisions to Section 163(j) under the CARES Act on international and U.S. state taxes. The panel will also offer effective tax planning techniques for pass-through entities in light of the CARES Act and provisions of Section 163(j).

Description

The CARES Act amended Section 163(j) of the Internal Revenue Code, significantly impacting taxpayers, partnerships, and international transactions. Tax professionals must understand critical tax rules and calculations for purposes of the business interest expense limitation and implement effective planning methods for taxpayers.

Under the 2017 tax reform bill, Section 163(j) placed limits on the deductibility of interest in a variety of situations, creating significant tax consequences for many partnerships. The recently amended Section 163(j) under the CARES Act allows taxpayers to deduct more business interest expense for the 2019 and 2020 tax years by increasing the adjusted taxable income (ATI) from 30% to 50% and allowing the carryback of net operating losses (NOLs) up to five years. Tax advisers to partnerships need a clear understanding of the impact of the amended rules on partners and to avoid unanticipated tax costs.

Amendments to Section 163(j) by the CARES Act impact both international and state tax planning and reporting. The ability to elect out of the increase in the ATI limitation or not elect to use 2019 ATI for the 2020 year, requires careful consideration for taxpayers for purposes of the base erosion and anti-abuse tax (BEAT) and the interaction of the NOL rules and current international tax laws. The new rules may also cause state tax issues for taxpayers in states that conform to the IRC in effect on a specific date.

Listen as our panel discusses new special partnership rules and the impact of the changes to Section 163(j) under the CARES Act on international and U.S. state taxes.

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Outline

  1. CARES Act changes to Section 163(j) and recent IRS guidance
  2. Special partnership rules
  3. International tax impact
  4. State tax impact
  5. Calculating ATI limitation to arrive at the deduction limitation
  6. Aggregation rules
  7. Opt-out election for specific real estate partnerships

Benefits

The panel will review these and other key issues:

  • The impact of the CARES Act on Section 163(j)
  • Critical provisions of Rev. Proc. 2020-22
  • Increase of ATI limitation for partnerships
  • Using pre-CARES Act Section 163(j) rules in the context of the BEAT
  • Potential compliance issues based on state conformity
  • Specific exceptions to the application of new Section 163(j)
  • How to calculate ATI for purposes of determining deduction limitations

Faculty

Howlett, Andrew
Andrew L. Howlett

Member
Miller & Chevalier

Mr. Howlett practices in the area of federal income tax with an emphasis on tax planning, tax-related...  |  Read More

Kaufman, Charles
Charles Kaufman
Managing Director
KPMG

Mr. Kaufman’s practice includes advising clients regarding transactions involving the taxation of partnerships,...  |  Read More

Wilhelmson, Bradley
Bradley R. Wilhelmson

Senior Manager, Tax
KPMG

Mr. Wilhelmson practices in the firm’s State and Local Tax (SALT) practice and serves as a dedicated resource for...  |  Read More

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